A commentary on insurance coverage issues in Hawaii and beyond

March 30, 2011

Policy During Which Property Damage Occurs Is Triggered

Addressing which of the two insurers' policies were responsible for the loss, the Indiana Court of Appeals found both policies were triggered because property damage occurred within each insurer's policy period. Grange Mut. Cas. Co. v. West Bend Mut. Ins. Co., 2011 Ind. App. LEXIS 442 (Ind. Ct. App. March 15, 2011).

Cincinnati Insurance Company insured the general contractor for a project at a school in Indianapolis. A subcontractor was hired to install storm piping. The subcontractor completed work on May 3, 2005.

On June 23, 2006, the school experienced significant water damage. It was later discovered that the flooding was due to a fractured storm drain pipe that had been caused by the subcontractor in 2005. Cincinnati paid $146,403 to indemnify the general contractor for damages incurred by the school. Cincinnati then sought subrogation against the subcontractor and its insurers, West Bend and Grange. Cincinnati also sought a declaratory judgment to determine which policy provided coverage for the damage.

West Bend insured the subcontractor when it was performing work at the school and damaged the drain pipe. Grange insured the subcontractor at the time of the flooding, when the subcontractor was no longer present at the job site. Both policies provided that the policy applied to "property damage" that occurred during the policy period.

West Bend and Grange jointly settled Cincinnati's claim against the subcontractor and agreed to litigate the coverage dispute amongst themselves. The trial court denied Grange's motion for summary judgment and granted West Bend's motion for summary judgment. The trial court ruled that the property damage was not continuous and that damage occurred when the flooding took place, after the subcontractor had left the job.

On appeal, Grange argued that the date of the occurrence, the negligent fracturing of the storm drain pipe, determined coverage. West Bend, on the other hand, contended that there were two separate occurrences: 1) the broken pipe and 2) the flooding. The court noted that the timing of the occurrence was not particularly relevant to the coverage determination. The key was the timing of the property damage because the policies required that the damage occur during the policy period.

Under the plain language of the insuring agreement, Grange's policy covered the property damage that resulted from the flood, regardless of when the original negligence took place.

Damage also occurred, however, during West Bend's policy period, triggering coverage under its policy with the subcontractor. Although the damages resulting from the subcontractor's negligence became apparent only after they evolved over time, some damage clearly resulted when the drain pipe was fractured, which was within West Bend's policy period. Further, West Bend's policy provided that property damage occurring during the policy period included "any continuation, change or resumption of that 'property damage' after the end of the policy period." Therefore, the policy covered all damages that flowed from the original damage, including the extensive flood damage.

Thus, both policies covered the flood damage. The policies had similar other insurance clauses that provided for contribution by equal shares from each insurer.

Comments

Policy During Which Property Damage Occurs Is Triggered

Addressing which of the two insurers' policies were responsible for the loss, the Indiana Court of Appeals found both policies were triggered because property damage occurred within each insurer's policy period. Grange Mut. Cas. Co. v. West Bend Mut. Ins. Co., 2011 Ind. App. LEXIS 442 (Ind. Ct. App. March 15, 2011).

Cincinnati Insurance Company insured the general contractor for a project at a school in Indianapolis. A subcontractor was hired to install storm piping. The subcontractor completed work on May 3, 2005.

On June 23, 2006, the school experienced significant water damage. It was later discovered that the flooding was due to a fractured storm drain pipe that had been caused by the subcontractor in 2005. Cincinnati paid $146,403 to indemnify the general contractor for damages incurred by the school. Cincinnati then sought subrogation against the subcontractor and its insurers, West Bend and Grange. Cincinnati also sought a declaratory judgment to determine which policy provided coverage for the damage.

West Bend insured the subcontractor when it was performing work at the school and damaged the drain pipe. Grange insured the subcontractor at the time of the flooding, when the subcontractor was no longer present at the job site. Both policies provided that the policy applied to "property damage" that occurred during the policy period.

West Bend and Grange jointly settled Cincinnati's claim against the subcontractor and agreed to litigate the coverage dispute amongst themselves. The trial court denied Grange's motion for summary judgment and granted West Bend's motion for summary judgment. The trial court ruled that the property damage was not continuous and that damage occurred when the flooding took place, after the subcontractor had left the job.

On appeal, Grange argued that the date of the occurrence, the negligent fracturing of the storm drain pipe, determined coverage. West Bend, on the other hand, contended that there were two separate occurrences: 1) the broken pipe and 2) the flooding. The court noted that the timing of the occurrence was not particularly relevant to the coverage determination. The key was the timing of the property damage because the policies required that the damage occur during the policy period.

Under the plain language of the insuring agreement, Grange's policy covered the property damage that resulted from the flood, regardless of when the original negligence took place.

Damage also occurred, however, during West Bend's policy period, triggering coverage under its policy with the subcontractor. Although the damages resulting from the subcontractor's negligence became apparent only after they evolved over time, some damage clearly resulted when the drain pipe was fractured, which was within West Bend's policy period. Further, West Bend's policy provided that property damage occurring during the policy period included "any continuation, change or resumption of that 'property damage' after the end of the policy period." Therefore, the policy covered all damages that flowed from the original damage, including the extensive flood damage.

Thus, both policies covered the flood damage. The policies had similar other insurance clauses that provided for contribution by equal shares from each insurer.